Second Quarter 2024 Press Release

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Badger Meter Reports Record Second Quarter 2024 Financial Results

July 19, 2024

MILWAUKEE--(BUSINESS WIRE)-- Badger Meter, Inc. (NYSE: BMI) today reported record results for the second quarter ended June 30, 2024.

Second Quarter 2024 Highlights

• Record total sales of $216.7 million, 23% higher than the prior year's $175.9 million.
• Operating profit increased 41% year-over-year, with operating profit margins expanding 240 basis points to a record 19.2% from 16.8%.
• Diluted earnings per share (EPS) increased 47% to $1.12, up from $0.76 in the comparable prior year quarter.
• Introduced BlueEdge™, the platform brand aimed at simplifying the Badger Meter suite of scalable solutions integrating water technology, software and services for efficient water management.
• Released 2023 Sustainability Report illustrating value-enhancing linkage between financial and ESG performance.

"Our second quarter sales surpassed the $200 million milestone for the first time on the continued strength of AMI demand coupled with customer-accelerated backlog conversion. Record operating profit margins and robust EPS growth in the quarter were the result of higher sales volumes, operational execution and continued selling, engineering and administration (SEA) expense leverage," said Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer. "I want to thank our employees across the globe for their collective contributions to this record financial performance and for their tireless support of our customers."

Second Quarter Operating Results

Utility water sales increased 26% year-over-year reflecting broad-based growth across the comprehensive suite of smart water offerings, most notably the adoption of our differentiated cellular AMI solution. This includes higher sales of ORION^® Cellular endpoints and BEACON^® Software as a Service (SaaS) coupled with increased water meter volumes, both mechanical as well as E-Series^® Ultrasonic meters. Utility water sales also benefitted from the conversion of elevated backlog.

Sales of flow instrumentation products increased 5% year-over-year with solid growth in the water-focused end markets such as wastewater, globally.

Operating earnings increased 41% year-over-year, with operating profit margins reaching a record 19.2% in the second quarter of 2024, a 240-basis point improvement from the prior year's 16.8%. Gross margin dollars increased $15.9 million year-over-year, and gross margin as a percent of sales was 39.4%, in line with the 39.5% in the comparable prior year period and continuing at the higher end of the company's normalized range. The stable gross margin range reflects the continued benefits of positive sales mix and higher volumes despite ongoing inflationary cost pressures.

SEA expenses in the second quarter of 2024 were $43.9 million, $3.9 million higher than the comparable prior year quarter and up $3.3 million sequentially from the first quarter. The year-over-year increase in SEA expenses resulted from continued growth investments including higher personnel-related and R&D costs. SEA as a percent of sales improved 250 basis points to 20.2% from 22.7% in the comparable prior year quarter as a result of the record sales.

The tax rate for the second quarter of 2024 was 23.8%, below the prior year's 25.8% due partially to a discrete benefit related to equity compensation transactions. As a result of the above, combined with increased interest income year-over-year, EPS was a record $1.12, up 47% compared to $0.76 in the comparable prior year period.

Outlook

Bockhorst continued, "At the halfway point of the year, we remain pleased with our execution and ability to capitalize on the durable macro trends benefiting the water industry. Our bid funnel and order rates remain constructive, yet as we have long communicated, we face increasingly difficult year-over-year comparisons as the year progresses. With a normalizing backlog, our focus remains on high single digit sales growth in the back half of the year and over the cycle, along with modest operating margin expansion year-over-year, driven by favorable sales mix, value-based price/cost management and SEA leverage. Our balance sheet remains favorably aligned to both organic and acquisition-related growth investments to drive our long-term performance.

As we continue to move beyond the meter, we've given a name - BlueEdge - to our expanding suite of end-to-end smart water offerings that give customers the ability to tailor and customize solutions to best meet their unique water resource management needs. These connected devices deliver valuable insights aimed at solving customer challenges across the water cycle. BlueEdge also serves as a strategic lens through which we can evaluate growth investments.

We published our 2023 sustainability report during the quarter which highlights our incremental progress on mitigating ESG risks, reducing costs and enabling customer sustainability outcomes. By both managing and enabling sustainability we aim to safeguard our future.

Bockhorst concluded, "Our resilient end markets, business momentum and our continued focus on innovation and execution provides us with confidence in our ability to increase shareholder value while we enable customers to preserve the world's most precious resource."

Conference Call and Webcast Information

Badger Meter management will hold a conference call to discuss the Company's second quarter 2024 results today, Friday July 19, 2024 at 10:00 AM Central/11:00 AM Eastern time. The listen-only webcast and related presentation can be accessed via the Investor section of our website. Participants can register to take part in the call using this online registration link: https://www.netroadshow.com/events/login?show=6b9207bf&confId=67844

Safe Harbor Statement

Certain statements contained in this news release, as well as other information provided from time to time by Badger Meter, Inc. (the "Company") or its employees, may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those statements. The Company's results are subject to general economic conditions, variation in demand from customers, continued market acceptance of new products, the successful integration of acquisitions, competitive pricing and operating efficiencies, supply chain risk, material and labor cost increases, tax reform and foreign currency risk. See the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for further information regarding risk factors, which are incorporated herein by reference. Badger Meter disclaims any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.

About Badger Meter

With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water solutions encompassing flow measurement, quality and other system parameters. These offerings provide our customers with the data and analytics essential to optimize their operations and contribute to the sustainable use and protection of the world's most precious resource. For more information, visit www.badgermeter.com.

BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except share and earnings per share data)
		Three Months Ended June 30,			Six Months Ended June 30,
			2024					2023					2024					2023
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net sales		$	216,658				$	175,858				$	412,938				$	334,959
Cost of sales			131,290					106,424					250,392					202,709
Gross margin			85,368					69,434					162,546					132,250
Selling, engineering and administration			43,856					39,932					84,456					77,702
Operating earnings			41,512					29,502					78,090					54,548
Interest income, net			(1,862	)				(827	)				(3,389	)				(1,449	)
Other pension and postretirement costs			12					33					25					65
Earnings before income taxes			43,362					30,296					81,454					55,932
Provision for income taxes			10,306					7,803					19,267					14,024
Net earnings		$	33,056				$	22,493				$	62,187				$	41,908
Earnings per share:
Basic		$	1.13				$	0.77				$	2.12				$	1.43
Diluted		$	1.12				$	0.76				$	2.11				$	1.42
Shares used in computation of earnings per share:
Basic			29,361,034					29,272,693					29,341,407					29,264,166
Diluted			29,528,938					29,447,525					29,512,362					29,434,467

BADGER METER, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
Assets	June 30,			December 31,
		2024			2023
		(Unaudited)
Cash and cash equivalents		$	226,212			$	191,782
Receivables			106,229				83,507
Inventories			161,266				153,674
Other current assets			15,510				13,214
Total current assets			509,217				442,177
Net property, plant and equipment			72,454				73,878
Intangible assets, at cost less accumulated amortization			50,178				53,737
Other long-term assets			36,056				33,964
Goodwill			113,355				113,163
Total assets		$	781,260			$	716,919
Liabilities and Shareholders' Equity
Payables		$	96,011			$	81,807
Accrued compensation and employee benefits			21,768				29,871
Other current liabilities			20,340				20,270
Total current liabilities			138,119				131,948
Deferred income taxes			4,838				5,061
Long-term employee benefits and other			75,165				63,428
Shareholders' equity			563,138				516,482
Total liabilities and shareholders' equity		$	781,260			$	716,919

BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
		Three Months Ended June 30,			Six Months Ended June 30,
		2024			2023			2024			2023
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Operating activities:
Net earnings		$	33,056				$	22,493				$	62,187				$	41,908
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation			2,849					2,775					5,741					5,438
Amortization			5,242					4,132					10,360					8,416
Deferred income taxes			-					(366	)				-					(376	)
Noncurrent employee benefits			(22	)				(185	)				(21	)				(222	)
Stock-based compensation expense			2,010					1,601					3,281					2,607
Changes in:
Receivables			(14,053	)				340					(23,217	)				(6,503	)
Inventories			(851	)				(12,314	)				(7,256	)				(23,753	)
Payables			5,379					1,145					13,339					8,104
Prepaid expenses and other assets			(424	)				(2,847	)				(8,489	)				(4,980	)
Other liabilities			3,233					5,995					1,954					10,100
Total adjustments			3,363					276					(4,308	)				(1,169	)
Net cash provided by operations			36,419					22,769					57,879					40,739
Investing activities:
Property, plant and equipment expenditures			(2,341	)				(2,664	)				(5,017	)				(6,935	)
Acquisitions, net of cash acquired			-					(75	)				(3,000	)				(17,127	)
Net cash used for investing activities			(2,341	)				(2,739	)				(8,017	)				(24,062	)
Financing activities:
Dividends paid			(7,934	)				(6,591	)				(15,876	)				(13,217	)
Proceeds from exercise of stock options			521					-					751					58
Net cash used for financing activities			(7,413	)				(6,591	)				(15,125	)				(13,159	)
Effect of foreign exchange rates on cash			237					5					(307	)				235
Increase in cash and cash equivalents			26,902					13,444					34,430					3,753
Cash and cash equivalents - beginning of period			199,310					128,361					191,782					138,052
Cash and cash equivalents - end of period		$	226,212				$	141,805				$	226,212				$	141,805

Source: Badger Meter, Inc.

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